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Oregon to pursue legal action against Oracle over Cover Oregon

updated 03:14 pm EDT, Sun June 1, 2014

by MacNN Staff

Attorney general asked to 'immediately initiate legal action' against Oracle

Oregon's Governor John Kitzhaber has asked the state's attorney general to begin filing legal action against the main software contractor behind the Cover Oregon health insurance exchange. Oracle, the targeted contractor, is said to have not delivered on its promises, issuing a website full of bugs, missing a number of deadlines and creating a system with "fundamental flaws" in its architecture.

Believing that Oregonians were never delivered a product that worked, Kitzhaber is looking to place the blame on the company believed to be responsible for one of the largest insurance exchange failures in the country. Several reviews have been launched regarding the program, with all of them pinning blame on Oracle for problems ranging from poor performance and failure to meet industry standards.

"Let me be clear. I believe the law is on our side. I believe justice is on our side," said Governor Kitzhaber. "I also understand that Oracle is a large corporation, the second largest software company in the world, and it will undoubtedly fight us tooth and nail, but I will not allow that to stop us from recovering the money Oracle received for technology that did not work and was not delivered on time."

On top of seeking legal action through state channels, the Oregon governor has also reached out at the federal level to impose additional penalties. Kitzhaber has written letters to the Inspector General of the U.S. Department of Health and Human Services asking that they consider a "full range of legal options" against the company. Other letters have also been sent to Oregon's U.S. Senators Ron Wyden and Jeff Merkley urging them to "use their oversight authority to help investigate and recoup taxpayer dollars." Both Wyden and Merkley commented on the situation to KATU.

"It's our intent that anyone - anyone - involved in perpetrating fraud or ripping off Oregonians is going to be held accountable and that's the point of the investigation," said Senator Wyden.

"I think it would be absolutely wrong not to try to recover funds, because when a company signs up to deliver a product and says it's going to deliver it on time, and then doesn't, there needs to be accountability," said Senator Merkley.

Oracle issued a statement to Gigaom over the legal action being threatened against them. A spokeswoman for the company stated that Oracle was never in charge of the program, but instead the Oregon Health Authority and Cover Oregon divisions were responsible for the downfall of the exchange. It is pointed out that the Governor had admitted to the mismanagement of the project by the state agencies, but it looks like he is trying to shift the blame.

"We understand the political nature of the announcement just made and that the Governor wants to shift blame from where it belongs," state the spokeswoman. "We are proud of the work that we have done to enable over 420,000 Oregonians to enroll in health care. We look forward to an investigation that we are confident will completely exonerate Oracle."

Several issues with the development lend to the support of Oracle's claims, including the poor management of the program, the types of contracts the state signed into and the lack of a system integrator. Had the state decided to hire a system integrator for the project, many of the issue may have been caught before the exchange was launched. Oracle was also signed to time and materials contracts, leaving the company nothing specific to deliver.

Cover Oregon has been plagued by problems since the launch of the national health care mandate. Rather than teaming up with federal management, Oregon had indicated in 2011 that it would offer its own exchange to residents. However, the program has never worked properly. This has resulted in a handful of officials within the state resigning their positions that had oversight on the program. The project has cost the state close to $160 million, with Oracle receiving most of the money owed. Oregon is currently withholding $25 million in payments to the company.

Most issues with the program involve the use of a PDF file for electronic enrollment. Instead of using an online form system or other database style input, citizens attempting to sign up for healthcare were left to fill out the form with a required field that couldn't be found on the document. This meant the document couldn't be completed online, requiring those trying to comply with the Affordable Care Act to print the 20 page document and mail it off. This error, as well as other issues, resulted in Oregon pushing back the deadline for filing before finally admitting defeat in April and turning to Heathcare.gov for future enrollment.

It is unclear at this point what Oregon could have to gain from pursuing a legal battle with the company that brings in $37 billion in revenue. While the return of the money paid to Oracle might soothe the state's black eye, the damage has already been levied on its citizens. A legal battle this size, even if lost, is a drop in the bucket for Oracle. A federal investigation by the U.S Department of Justice, that is currently running, may yield something more meaningful against the corporation that the state can use for leverage in a future court battle.

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